...Coca-Cola Co. (KO) | Short-term (Operating) Activity Analysis Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory. * Ratios (Summary) * Inventory Turnover * Receivables Turnover * Payables Turnover * Working Capital Turnover * Average Inventory Processing Period * Average Receivable Collection Period * Operating Cycle * Average Payables Payment Period * Cash Conversion Cycle Ratios (Summary) Coca-Cola Co., short-term (operating) activity ratios | | Dec 31, 2010 | Dec 31, 2009 | Dec 31, 2008 | Dec 31, 2007 | Dec 31, 2006 | | Turnover Ratios | | Inventory turnover | 13.25 | 13.16 | 14.61 | 13.00 | 14.68 | | Receivables turnover | 7.93 | 8.25 | 10.34 | 8.70 | 9.31 | | Payables turnover | 18.61 | 21.98 | 23.32 | 20.91 | 25.93 | | Working capital turnover | 6.76 | 6.59 | 8.18 | 6.94 | 7.30 | | Average No. of Days | | Average inventory processing period | 28 | 28 | 25 | 28 | 25 | | Add: Average receivable collection period | 46 | 44 | 35 | 42 | 39 | | Operating cycle | 74 | 72 | 60 | 70 | 64 | | Less: Average payables payment period | -20 | -17 | -16 | -17 | -14 | | Cash conversion cycle | 54 | 55 | 45 | 53 | 50 | Source: Based on data from Coca-Cola Co. Annual Reports Ratio | Description | The company | | | | Inventory turnover | An activity ratio calculated as revenue divided by inventory...
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...in by: Ewa Dembska, Jennifer March, Sarah Steinberger Course: WIB-bi 13 Academic tutor: Prof. Dr. Mieczysław Grudziński Warsaw, 25th March 2015 | Introduction to the problem You are the Chief Financial Officer (CFO) of BP. This afternoon you played golf with a member of the company’s board of directors. Somewhere during the back nine, the board member enthusiastically described a recent article she had read in a leading management journal. This article noted several companies that had improved their stock price performance through effective working capital management, and the board member was intrigued. She wondered whether BP was managing its working capital effectively and, if not, whether BP could accomplish something similar. How was BP managing its working capital, and how does it compare to its competitors? Upon returning home, you decide to do a quick preliminary investigation using information freely available on the Internet. Task 1 Obtain BP’s financial statements for the past four years from Yahoo! Finance (http://finance.yahoo.com). See attachments Excel File: Case#3 Spreadsheet Task 2 Obtain the competitors' ratios for comparison from Yahoo! Finance (http://finance.yahoo.com). See attachments Excel File: Case#3 Spreadsheet Task 3 Compute the cash conversion cycle for BP for each of the last three years. To obtain the Average Inventory I took the inventory of the current year and the inventory of the previous year and divided it by 2. I decided for this method...
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...effect on liquidity as well on profitability of the firm. In this research, we have selected a sample of 94 Pakistani firms listed on Karachi Stock Exchange for a period of 6 years from 1999 – 2004, we have studied the effect of different variables of working capital management including the Average collection period, Inventory turnover in days, Average payment period, Cash conversion cycle and Current ratio on the Net operating profitability of Pakistani firms. Debt ratio, size of the firm (measured in terms of natural logarithm of sales) and financial assets to total assets ratio have been used as control variables. Pearson’s correlation, and regression analysis (Pooled least square and general least square with cross section weight models) are used for analysis. The results show that there is a strong negative relationship between variables of the working capital management and profitability of the firm. It means that as the cash conversion cycle increases it will lead to decreasing profitability of the firm, and managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level. We find that there is a significant negative relationship between liquidity and profitability. We also find that there is a positive relationship between size of the firm and its profitability. There is also a significant negative relationship between debt used by the firm and its profitability. Field of Research: Corporate Finance 1. Introduction ...
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...about evaluating financial performance. We can evaluate performance by looking at financial ratios and conducting different forms of analyses. Some useful analyses are trend analysis, cross-sectional analysis, and industry comparables analysis. Trend analysis is used to examine a venture’s performance over time. Cross-sectional analysis is used to compare a venture’s performance compared to another company at the same point in time. Industry comparables analysis is used to compare a venture’s performance against the average company’s performance in the same industry. Next, we looked at MPC income statements and balance sheets. A major part of MPC is cash burn. Cash burn is the cash a venture expends on its operating and financing expenses, as well as its investments in assets. Another important part of MPC is cash build, which is equal to the (net sales – change in receivables). In order to find the net cash burn, you must subtract the cash build from the cash burn. Liquidity ratios, which indicate the ability to pay short-term liabilities when they come due, is also an important aspect. Another evaluation tool is the conversion period ratio. This ratio indicates the average time it takes in days to convert current assets and current liability accounts into cash. The operating cycle and the cash conversion cycle also play a part in the evaluation. There are also different types of conversion periods. They include inventory-to-sale, sale-to-cash, and purchase-to-payment...
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...edu.pk Abdul Qayyum Professor / Registrar, Pakistan Institute of Development Economics, Islamabad E-mail: abdulqayyum@pide.org.pk Mahmood Ahmed Bodla Professor & Director, COMSATS Sahiwal, Pakistan E-mail: director@ciitsahiwal.edu.pk Abstract Working capital management plays a significant role in better performance of manufacturing firms. This paper analyzes the impact of working capital management on firm’s performance in Pakistan for the period 1998 to 2007. For this purpose, balanced panel data of 204 manufacturing firms is used which are listed on Karachi Stock Exchange. The results indicate that the cash conversion cycle, net trade cycle and inventory turnover in days are significantly affecting the performance of the firms. The manufacturing firms are in general facing problems with their collection and payment policies. Moreover, the financial leverage, sales growth and firm size also have significant effect on the firm’s profitability. The study also concludes that firms in Pakistan are following conservative working capital management policy and the firms are needed to concentrate and improve their collection and payment policy. The effective policies must be formulated for the individual components of working capital. Furthermore, efficient Management...
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...effect on liquidity as well on profitability of the firm. In this research, we have selected a sample of 94 Pakistani firms listed on Karachi Stock Exchange for a period of 6 years from 1999 – 2004, we have studied the effect of different variables of working capital management including the Average collection period, Inventory turnover in days, Average payment period, Cash conversion cycle and Current ratio on the Net operating profitability of Pakistani firms. Debt ratio, size of the firm (measured in terms of natural logarithm of sales) and financial assets to total assets ratio have been used as control variables. Pearson’s correlation, and regression analysis (Pooled least square and general least square with cross section weight models) are used for analysis. The results show that there is a strong negative relationship between variables of the working capital management and profitability of the firm. It means that as the cash conversion cycle increases it will lead to decreasing profitability of the firm, and managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level. We find that there is a significant negative relationship between liquidity and profitability. We also find that there is a positive relationship between size of the firm and its profitability. There is also a significant negative relationship between debt used by the firm and its profitability. Field of Research: Corporate Finance 1. Introduction ...
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...The Kroger Co. Financial Statement Analysis Axia College University of Phoenix Table of Contents: Corporate Overview ………………………………………………….. 03 Financial Ratio Analysis ….…………………………………………... 04 Current Ratio ………………………………………….……… 04 Quick Ratio ……………………………………………....…… 05 Inventory Turnover Ratio …………………………………….. 07 Debt Ratio ……………………………………………….……. 08 Net Profit Margin Ratio …………………………………....…. 10 Return on Investment (ROI) ……………………………….…. 11 Return on Equity (ROE) …………………………………….... 12 Price-to-Earnings Ratio (P/E) ……………………………….... 13 Analysis of Working Capital Management …………………………... 14 Common-size Income Statements …………………………..... 15 Inventory Conversion Period ……………………………….....16 Receivables Conversion Period ……………………………….17 Payables Deferral Period …………………………………….. 17 Cash Conversion Cycle ………………………………………. 17 Long-term Debt …………………………………………………….... 19 Stock Issues ………………………………………………………..… 20 Weighted Average Cost of Capital (WACC) ……………………..…. 21 Recommendations for Investors ………………………………..……. 25 References ………………………………………………………….... 26 Corporate Overview: The Kroger Co. is one of the largest supermarket chains in the United States with approximately 2,500 stores in 31 states. Total food store square footage exceeded 145 million as of February 2008...
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...Submitted To: Submitted By: Prof. R. Srinivasan Gulshan Sharma FPG1113/021 Impact of working capital on the profitability of the firm | Table of Content Topic.............................................................................................................................Page No. Acknowledgement........................................................................................................ 3 Executive Summary...................................................................................................... 4 Company Profile........................................................................................................... 5 Introduction.................................................................................................................. 10 Objective...................................................................................................................... 19 Research Methodology................................................................................................ 19 Limitation..................................................................................................................... 19 Data Analysis............................................................................................................... 20 Findings............................................................................................
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...Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return Gross margin, Gross profit margin or Gross Profit Rate[7][8] [pic] OR [pic] Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS)[8][9] [pic] Note: Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit.[10] This is true if the firm has no non-operating income. (Earnings before interest and taxes / Sales[11][12]) Profit margin, net margin or net profit margin[13] [pic] Return on equity (ROE)[13] [pic] Return on investment (ROI ratio or Du Pont Ratio)[6] [pic] Return on assets (ROA)[14] [pic] Return on assets Du Pont (ROA Du Pont)[15] [pic] Return on Equity Du Pont (ROE Du Pont) [pic] Return on net assets (RONA) [pic] Return on capital (ROC) [pic] Risk adjusted return on capital (RAROC) [pic] OR [pic] Return on capital employed (ROCE) [pic] Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity Cash flow return on investment (CFROI) [pic] Efficiency ratio [pic] Net gearing [pic] Basic Earnings Power Ratio[16] [pic] ...
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...Introduction In the field of trade and commerce, being able to invest and buy appropriate technology or acquire another company is not an easy task. What is the financial performance and position in terms working capital management of the selected hospitals in Cagayan de Oro City for the past five years (2005-2009). This research study deals primarily with the assessment of profitability, liquidity and working capital management of the privately - owned hospitals in Cagayan de Oro City that submit a complete set of financial statements in the Securities and Exchange Commission (SEC). Determining the relationship of the following variables: Profitability, Liquidity and Working Capital Management are needed to assess the Working Capital Management...
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...131 companies listed in the Athens Stock Exchange (ASE) for the period of 2001-2004. The purpose of this paper is to establish a relationship that is statistical significant between profitability, the cash conversion cycle and its components for listed firms in the ASE. The results of our research showed that there is statistical significance between profitability, measured through gross operating profit, and the cash conversion cycle. Moreover managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component (accounts receivables, accounts payables, inventory) to an optimum level. Introduction Capital structure and working capital management are two areas widely revisited by academia in order to postulate firms’ profitability. Working capital management have been approached in numerous ways. Other researchers studied the impact of optimum inventory management while other authors studied the management of accounts receivables in an optimum way that leads to profit maximisation1. According to Deloof 2 (2003) the way that working capital is 1 Besley, Scott and R.L. Meyer (1987), “An Empirical Investigation of Factors Affecting the Cash Conversion Cycle”, Annual Meeting of the Financial Management Association,...
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...Profitability ratios Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return Gross profit margin or Gross Profit Rate OR Operating Income Margin, Operating profit margin or Return on sales (ROS) Note: Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit.[10] This is true if the firm has no non-operating income. (Earnings before interest and taxes / Sales[11][12]) Profit margin, net margin or net profit margin[13] Return on equity (ROE)[13] Return on investment (ROI ratio or Du Pont Ratio)[6] Return on assets (ROA)[14] Return on assets Du Pont (ROA Du Pont)[15] Return on Equity Du Pont (ROE Du Pont) Return on net assets (RONA) Return on capital (ROC) Risk adjusted return on capital (RAROC) OR Return on capital employed (ROCE) Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity Cash flow return on investment (CFROI) Efficiency ratio Net gearing Basic Earnings Power Ratio[16] Liquidity ratios Liquidity ratios measure the availability of cash to pay debt. Current ratio (Working Capital Ratio)[17] Acid-test ratio (Quick ratio)[17] Cash ratio[17] Operation cash flow ratio Activity ratios (Efficiency Ratios) Activity ratios measure the effectiveness of the firms use of resources. Average collection...
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...are 308 while 28 companies listed at Karachi Stock Exchange are in sample. Correlation and pooled panel data regression analysis is performed. Results show that day’s inventory, cash conversion cycle, cash ratio, account receivable to sale ratio, short term investment ratio, secured short term obligation and fixed asset ratio are negatively affecting profitability of firm. Whereas quick ratio, days account receivable and working capital are positively affecting profitability. Key words: Return on Asset, Cash Conversion Cycle, Secured Short Term Obligations, Cash Ratio, Account Receivable to Sale INTRODUCTION In finance field two extensively examined areas are capital structure and working capital management. It is matter of great importance both for researchers and corporate individuals to figure out firm’s value and profitability. Working capital management has a direct impact on the firm profitability along with reducing the liquidity risk. Liquidity is one face of coin and profitability is other. It clarify that working capital management is directly proportional of firm profitability. US financial crises highlighted problems in already identified factors for working capital management. Introduction of Basel 3 accord also directed us toward working capital management to hold liquidity in financial sector. Current business world is...
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...Introduction: Term paper is a system by which we can familiarize ourselves with the practical situation. Moreover, we can bridge up the gap of the theoretical knowledge and practical situation. As an indispensable part of BBA program, I was placed in M.M. ISPAHANI Ltd. for completing my term paper. I was rotated in almost every desk of the organization and all over the factory. Statement of the Problem: The efficient management of working capital is very vital for a business survival. This is premised on the fact having too much working capital signifies inefficiency, whereas too little cash at hand signifies that the survival of business is shaky. Here I focus on working capital management practices in M. M. ISPAHANI Ltd. to evaluate the real condition that are existing. Objectives of the study: The main objective of the study is to gather practical knowledge about working capital management of M.M. ISPAHANI Ltd. My study covers the following areas: * To Study the working capital policies of the sample company. * To study the structure of working capital. * To measure the utilization of working capital of the sample company. * To examine the impact of working capital on profitability. * To identity the problems facing the sample company. * To suggest the recommendation of measuring working capital Management efficiency. Scope of the Study: In my term paper the sample size was one and M.M. ISPAHANI Ltd. was selected as a sample and my topic was...
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...Introduction World Economic Forecast. According to the World Economic Forum 2014, leading financial experts told participant that that the global economy was cautiously optimistic. Even though the global economic activity has strengthened; and global growth is expected to be 3.7 percent in 2014 and 3.9 percent in 2015, old risks are still present and the coming years might bring volatility. Therefore how governments plan to recover from the economic meltdown might determine whether there will be inflation or deflation. In emerging economies exports are the main drivers of growth activity; demand of goods from the advanced economies will lead to growth although domestic conditions may also interfere with the growth. Although many emerging markets have started to benefit from increased external demand their domestic growth has been slower than expected, this has been attributed to political uncertainty, policies and bottlenecks, which has affected investments negatively. These countries include Brazil, Russia, Middle Eastern countries and North African Countries. (World Economic Outlook Update, January 2014) In the U.S, federal budget deficit has fallen and banks are recapitalizing and working off bad loans. There will be no additional fiscal austerity at the federal, state and local government level meaning that there will be no budget cuts, spending will likely remain the same or go up stimulating the economy, and accelerating GDP from an average of 2.2 in the last four years...
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